Via Reuters comes an analysis of the success that South Korean automakers Hyundai and Kia have had in recent months, particulalry in comparison to their Japanese rivals.
Hyundai has also struck gold with big operations in India and China — two of the fastest-growing markets. And ingenious marketing such as an offer to allow buyers to return vehicles if they lost their jobs within a year helped Hyundai and Kia increase sales even in the sinking U.S. market.
The volume growth has come hand in hand with industry-defying profit improvements. In July-September, Hyundai made a record net profit of 979 billion won ($847 million) — equal to the combined earnings of Toyota and Honda Motor that quarter.
For the sake of full disclosure I’ve driven a Hyundai for the past several years, first in the US because it came cheap and now in Korea because, well… because I’m in Korea.
While I’m loathe to heap scorn on our first Hyundai, an Elantra — simply because like a loyal canine that refused to quit it took my family and I as far afield as Vancouver and New Mexico — the thing rattled and shook whenever we approached the speed limit. The model I drive now is a vast improvement, far more solid and better milage, but in the end I doubt either will outlast the 25 year old Toyota Camry my folks still drive with 200,000+ miles on it.
But anyway, some of the reasons cited in the Reuter’s piece for Hyundai’s success are the local currency’s relative weakness compared to the Japanese yen, which aid in boosting exports.
This then dovetails with the second reason, which has to do with Seoul’s free-for-all market policies that has led to “more than 40 free trade agreements (FTAs) with countries ranging from the United States to India. Japan has less than a third as many, almost all of them with the rest of Asia.”
What this means for Korea was spelled out in a recent report that warned of a too-heavy reliance on international trade.
South Korea’s dependence on overseas trade exceeded 90 percent of the national income last year for the first time, leaving the nation’s economy more vulnerable to fluctuations in global market conditions…
Comparable ratios for Japan stood at 31.6 percent, while those for India, Australia and Britain were 37.7 percent, 39.1 percent and 41.2 percent, respectively, suggesting that those countries have well-nurtured domestic markets…
Lingering uncertainty in the job market is a major source of concern for leaders in Seoul when it comes to the health of South Korea’s domestic market. While unemployment figures have been improving there’s concern that they could drop off again once a government-led job creation plan ends this month. According to Yonhap irregular employees make up some 35 percent of the nation’s workforce.
The latest figures on household income aren’t promising either, with average household income fallingand for the second straight quarter with a family of two earning just under US$3000 per month.
Filed under: Asia, economy | Tagged: FTA, globalization, Japan, Korea
